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June 29, 2011

Prosecutor: No Criminal Charges in Burlington Telecom Probe (VIDEO)

* Update below: Burlington Mayor Bob Kiss reaction * 

After a six-month investigation, a top prosecutor announced today he is not filing criminal charges against anyone involved in the high-profile case of Burlington Telecom.

At a morning news conference, Chittenden County State’s Attorney T.J. Donovan said he decided not to prosecute city officials for “neglect of duty” as it relates to complying with a key condition in the municipal utility’s state license.

That condition required BT to repay any money it borrowed from the city’s universal checkbook — the so-called “cash pool” — within 60 days. BT ended up borrowing $16.9 million from the cash pool, which to date has not been repaid. Plans to refinance BT’s growing debt fell apart in 2008 when the global financial markets crashed. It wasn't until late September 2009 when the public first learned that BT was in such deep debt.

Donovan said the burden of proof required to bring a "neglect of duty" charge against one or more officials would be too high to guarantee a win at trial. Also, it would cost "tens, if not hundreds of thousands of dollars of the public's money [and] cause greater division with the city and disrupt the governance of the city, all with an uncertain outcome and no possibility of restitution of $17 million."

Even if it was a sure conviction, Donovan notes, anyone found guilty of the crime would spend a maximum of only one year in jail and face a $1000 fine.

DonovanDonovan (pictured) said he would lobby the legislature to increase the penalty for "neglect of duty" from a misdemeanor to a felony in order to make the charge carry a heavier penalty.

A misdemeanor conviction, noted Donovan, would not "act as a strong deterrent given the penalty is one year. An unsuccessful prosecution would severely damage and scar the city of Burlington for the foreseeable future. I am not willing to risk that possibility."

Donovan mentioned several times the impact a lengthy, expensive trial would have on the public purse as well as the reputation of the city, Chittenden County and the state.

That's got to be good news for outgoing Chief Administrative Officer Jonathan Leopold, whose last day on the job is tomorrow. Leopold announced earlier this year he was retiring from his post. At the time, it was believed that Donovan's investigation prompted Leopold to resign rather than risk being charged with a crime while still employed with the city and overseeing the city's finances.

Donovan would not name the individual, or individuals, who were the focus of his investigation — citing professional conduct rules that bar him from making "extrajudicial" comments about the targets of an investigation where no charges are filed.

Donovan said his decision not to prosecute is likely to anger some voters in Burlington and he accepts full responsibility for making the call not to bring charges.

"I get the public anger," said Donovan. "I'm a citizen of this city, and I'm angry too. This has been a difficult process for the city of Burlington. It's cast a cloud over the city and many important issues are not being dealt with and I hope this brings some kind of closure so we can move forward."

Though he’s not bringing criminal charges, Donovan said he’s not excusing the behavior of city officials and their handling of Burlington Telecom.

"My decision not to prosecute should not be misunderstood as excusing or condoning anyone's behavior," Donovan said. "To be clear, mismanagement, lack of oversight, lack of accountability, lack of communication, ignorance, arrogance and bad judgment all contributed to the current state of BT. The City of Burlington should publicly acknowledge its errors and continue to work to correct them in a transparent manner that inspires trust and confidence."

Given the track record of the Kiss administration, or the current city council, the words "trust" and "confidence" are not two words that come to mind.

Kurt Wright City Councilors Kurt Wright (R-Ward 4) and Vince Brennan (P-Ward 3) attended the press conference. Brennan left immediately afterward, while Wright stayed to answer reporters' questions.

Was justice served? Wright wouldn't say, though he did note that plenty of people in Burlington would likely disagree with Donovan's decision. However, Wright said he was glad that one more chapter in the BT novella is completed.

"I'm pleased that the investigation is completed because it moves a cloud that's been over the city and Burlington Telecom," said Wright (pictured). "I agree that serious mistakes were made and that the mayor and his administration need to be held accountable."

Given that may not happen in Vermont criminal court, Wright said that will likely happen in March 2012 if Mayor Bob Kiss decides to run again for mayor. Wright, a likely mayoral candidate, said already voters have rejected a host of items backed by Kiss, including instant runoff voting, a tax increase and other initiatives.

With the state criminal investigation completed, Wright added, it may make it easier for Burlington Telecom to find a strategic partner to keep it financially viable.

"This should enable the city to dig out from this hole," said Wright. A new strategic partner that can keep BT afloat is perhaps the only way taxpayers will see the $17 million repaid.

Donovan took over the case on December 18 from Orleans County State’s Attorney Keith Flynn when Flynn was appointed commissioner of the Vermont Department of Public Safety. But Donovan has extensive political ties in Burlington and his uncle’s law firm — McNeil Leddy & Sheahan — represents Burlington Telecom and the city. So he turned to his predecessor, Robert Simpson, to head up the investigation.

Addison County State’s Attorney David Fenster took over the part of the case related to BT’s lease with CitiCapital. He, too, decided not to bring "false claims" charges against the officials involved, which would have included attorneys working at McNeil, Leddy & Sheehan. Fenster began his investigation on May 18.

Donovan said he's also turned over materials gathered during his investigation to the "appropriate federal agency for their review." He would not name the federal agency.

Donovan’s decision has the potential to dislodge the dark cloud that has hung over the city of Burlington since the fall of 2009, and has spawned numerous late-night arguments at the city council, two special council subcommittees and a blue ribbon commission. Since then, the city has hired an outside consultant — Dorman & Fawcett — to run the day-to-day operations of Burlington Telecom and prepare it for either a sale or new investment partners. To date, BT officials have reported to state regulators that several outside investors are interested in some form of long-term financial deal with BT, but as of yet there's been no signed deal.

The cost of outside consultants and lawyers hired to help sort out BT's mess has nearly topped $1 million.

It's also uncertain at this point what, if anything, CitiCapital will do in relation to the $33.5 million lease the city terminated last year. CitiCapital told city officials earlier this year it wouldn't do anything precipitous given that city phone and Internet service are run off BT's network — including police and fire services.

CitiCapital officials have declined to talk to the news media about their plans. In April, CitiCapital said it was creating an inventory of equipment it would seek returned as collateral to cover some of the money owed by the city.

For Donovan, the decision to not prosecute is a risky move politically, especially as some Democrats pressure him to make a run for mayor. There are plenty of Burlington residents who wanted to see either Leopold or Kiss frog-marched out of City Hall and into a holding cell.

Donovan told reporters that calling the media to join him at City Hall to walk city officials out in handcuffs and drag them into court to face misdemeanor charges, well, that would have been a political decision.

If that were to happen, the frog-marching would have to be ordered by federal prosecutors.

But city officials aren’t out of the woods yet with regard to court proceedings and financial culpability. A taxpayer lawsuit that seeks immediate repayment of $16.9 million is still winding its way through Vermont Superior Court. In that suit, Leopold is named as a defendant, which means he could be on the hook personally to repay some of the money. A separate, federal investigation is underway in the U.S. Attorney’s Office.

U.S. Attorney Tristram Coffin won’t comment on his agency's BT probe. “Standard policy,” he told Seven Days.

OK, but given the political and financial anxiety Burlington Telecom has caused city taxpayers, might the feds make an exception and announce that they won’t be filing criminal charges, either? “We typically don’t, but there are times when we might make a decision to do otherwise,” conceded Coffin, who offered no details on his office’s investigation. “This might be one of those times.”

* Update - Statement from Burlington Mayor Bob Kiss *

"As mayor of the city I’m pleased that the state’s attorney has determined that no prosecution is warranted - a decision that will help BT and the city move forward. The city has fully cooperated with the investigation that was initiated over 18 months ago," said Kiss in a written statement. "The city will continue to identify potential strategic and financial partners to address financial and legal issues related to Burlington Telecom and work with the Public Service Department and Public Service Board to cure the city’s non-compliance with Conditions 17 and 60 of BT’s Certificate of Public Good. Burlington Telecom provides high quality services to Burlington residents and businesses with tremendous potential for the future."

One item I neglected to mention in the original post: At the press conference Donovan said he sat down with Kiss yesterday to formally notify him of his decision not to bring charges. In addition, Donovan said he reached out to city councilors last night and this morning to give them a heads up about today's announcement.

Kiss points to this as proof that no one did anything wrong in 3... 2...


Here is the Mayor's press release:

As Mayor of the City I’m pleased that the State’s Attorney has determined that no prosecution is warranted - a decision that will help BT and the City move forward.  The City has fully cooperated with the investigation that was initiated over 18 months ago.  The City will continue to identify potential strategic and financial partners to address financial and legal issues related to Burlington Telecom and work with the Public Service Department and Public Service Board to cure the City’s non-compliance with Conditions 17 and 60 of BT’s Certificate of Public Good.  Burlington Telecom provides high quality services to Burlington residents and businesses with tremendous potential for the future.

I am wondering if the city council had inside info to this issue before honoring the CAO at Mondays meeting?
If not than they are lucky not to be eating crow for dinner tonight.

Dale: At the press conference, TJ Donovan said he met with Mayor Kiss yesterday to give him a heads up about today's announcement. Donovan also said he reached out to all city councilors last night and this morning to give them advance notice. He said he was able to reach some, but not all, councilors. Hope this helps. I've added that detail as part of an update, which also includes the mayor's written statement. Awaiting a phone interview with the mayor.

Thanks for the info, it appears the council did gamble on possible crow for dinner and your investigating removes the conspiracy theory, which is good news for all.
Bottom line though still reads, Burlington invests improperly through cash pool in supporting BT, and that 16.9 million is not available to help out of important issues within the city, such as police, fire, library,arts, flood relief,streets,recreation, code, etc.
Of course the Mayor claims were are earning interest on the 16.9 million. Difficult to except or understand that answer by the Mayor.

I think what Donovan's really saying is that the civil suit's going to dole out justice that the criminal penalties can't even contemplate, so why spend the money. He couldn't have been clearer that this has absolutely nothing to do with an absence of wrongdoing.

I can't believe Kiss is still pretending that BT can survive. Mind boggling.

Hey Tyler:

See anything offensive in JCarter's post?

Oy, he said way more about himself than he did about anyone else. I hope that it isn't taken down.

Tyler feel free to delete, however, nothing I said is untrue. It does say something about me, it says I made a mistake when I voted for him, one I will never make again.

If you would like to be content with outright Chicago style corruption and consistent time after time dereliction of duty by Donovan then that's your right. I expect my governing officials TO DO THEIR JOBS !!

Yeah. Took that one down. That was well over the top, JCarter. Take a moment and relax before posting, please.

Time for the people of BTV to get active in their government. A wholesale change is in order from the Mayor through the council. It's ridiculous.

Donovan needs to go to. I will be drafting a letter and sending it to Peter Shumlin, Bill Sorrell and Donovan. I encourage everyone else that is as outraged by this blatant lack of duty and obvious political back slapping that has occurred.

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